GM, Delphi offer blue-collar buyouts
General Motors will offer buyouts to more than 125,000 factory workers, the companies said after reaching a cost-cutting deal with the United Auto Workers union.
The agreement, one of the largest ever of its kind in US industry, moves GM toward its goal of cutting 30,000 jobs by 2008 and helps avert the threat of a strike at Delphi that could cripple GM and cost it billions of dollars a month.
GM lost $10.6 billion in 2005, and estimates its obligations to Delphi workers under a 1999 spin-off will cost between $5.5 billion and $12 billion.
"This is a big, sweeping deal," David Cole, chairman of the Center for Automotive Research, said. "It really is a basic framework for a huge restructuring."
Other analysts said the deal, while positive, did not entirely remove the risk of a labour disruption at Delphi, a critical GM supplier still enmeshed in union talks aimed at slashing its own payroll costs.
"It's a good first step. Is it the full answer for GM? No," said Global Insight analyst George Magliano, who questioned whether enough UAW workers would take the packages.
Some UAW workers would be eligible for payouts of up to $140,000 if they give up future benefits. Others would receive $35,000 and continue to draw full pensions.
GM, which plans to shut 12 plants, has been losing market share to Japanese rivals that are not burdened by high pension and health-care obligations. The automaker also faces uncertain prospects for the sale of its financing arm, General Motors Acceptance Corp.
Shares of GM closed on the New York Stock Exchange at $22.01, almost unchanged, after surrendering early gains.
GM to record charges in 2006
GM said it would recognize the still-undetermined charges for the buyouts in 2006.
JP Morgan analyst Himanshu Patel said in a note to clients that the "upfront cash cost" to GM for the Delphi buyouts would be about $2 billion.
Some analysts cautioned that the program could fail to deliver on GM's cost-cutting goals if not enough workers accepted buyouts or if the plan relied too heavily on older rank-and-file retirements.
Goldman Sachs analyst Robert Barry said the best result for GM would be if a large number of younger workers accepted payments and agreed to forego future benefits, an outcome he called "improbable."
Merrill Lynch analyst John Murphy said GM's restructuring actions "will only allow it to tread water at best," until it stabilizes market share and invests more in development.
GM, the world's No. 1 automaker by sales but No. 8 by market capitalization, last week delayed filing its annual report because of accounting problems, raising questions about the tenure of Chief Executive Rick Wagoner, who took the company's helm in June 2000.
"We said we'd be working with UAW leadership to develop an accelerated attrition program that would help us achieve needed cost reductions as rapidly as possible," Wagoner said in a statement.
Delphi said about 13,000 of its 24,000 UAW-represented workers would be eligible for the early retirement incentives, including a one-time payment of $35,000.
The company, based in Troy, Michigan, also said that about 5,000 of its workers would have the opportunity to return to factory jobs with GM.
GM will fund the lump-sum payments and provide retirement benefits for any Delphi workers that return to its payroll.
Retirements could begin as early as June 1 and workers will have up to 52 days to make a decision after they are briefed on details of the plan. Early retirement incentives will also be offered to all of GM's 113,000 factory workers.
Of that total, 36,000 workers are currently eligible to retire under the UAW contract, while another 27,000 are close to 30 years of experience and will be offered special incentives, GM spokeswoman Katie McBride said.
If too many workers in a particular plant opt to take buyouts, the existing contract between GM and the union provides a seniority-based system to determine who would be eligible.
Delphi still negotiating
Delphi, which filed the biggest bankruptcy in US automotive history in October, has said it must slash wages, benefits and jobs to reorganize its struggling US operations.
The company is still negotiating with its unions over which of its factories will remain in operation and how overall wage and benefit levels will be reduced after Delphi emerges from bankruptcy.
Delphi's participation in the GM-led buyout deal is subject to approval by federal bankruptcy court.
The auto parts supplier said on Wednesday it still planned to file a motion to have its existing labor contracts voided by a bankruptcy judge on March 31 if it did not get a comprehensive deal with its unions.